Very recently, I wrote a post about the brilliance of Amazon’s (AMZN) latest move in the clouds as it launched a solution that fits the needs of people like you and I, namely just storing documents, music and photos among other things. While the big cash remains with business cloud clients, attracting the general population could help build very solid cash flows and despite the business being low margin, the flows are so consistent that it remains a very solid business.

Risky business?

The risk of course is significant in the cloud businesses. Last week, you might have noticed several big websites and web based services experienced downtime. What caused it? Server problems on Amazon’s AWS (Amazon Web Services) that started early Thursday morning and remained unresolved for several hours with more problems occurring in the next few days.Needless to say that the impact for companies that experienced downtime is significant both financially and from a PR standpoint. As our economy moves to the digital world, the reliance on these systems becomes increasingly important and a day like Thursday will certainly be brought up when Amazon sales guys meet with potential clients. Can a hospital store its data in the clouds and risk security breaches or offline time? It is debatable. In cases likes these, both the affected companies take a serious hit. It’s funny how Amazon goes off about the huge promise and importance of AWS services in its earnings calls but on a day like today, we are quickly pointed to the fact that it only represents 2% of Amazon’s revenues and should not be a source of concern. Funny how that works.

Moving to the clouds will not stop

As many questions as there is regarding cloud computing, the move will continue. Despite all of the risks involved, I think it remains a cheaper, better and even often more secure method of running things. That is why companies like Microsoft (MSFT), Google (GOOG) and Apple (AAPL) are putting so many resources into their cloud strategy and why I expect more competition to jump in. I think it will be interesting to see what kind of products come out of these companies and how much importance these units will gain within companies like Google and Apple. Some have been writing about companies stopping their move to the clouds but I don’t see it happening. The fact is that no matter where your network is, there are risks involved and being in the clouds or not does not change that.

How big of a business will this become?

I think it will be huge. Not only will most of the international companies be using these services but they will use it more and more and become dependent on it. The big thing is that despite what some would think, the barriers to entry for cloud computing are significant. Google, Apple, Facebook and others are building huge data warehouses, have expensive and rare expertise and it will be difficult for companies to join in. What does this mean? I think it means less competition and as commercial clients become addicted to the clouds, prices will go up and the activity will become more profitable.

Have you ever wondered by so few individuals are able to one day live off of a passive income portfolio? Many are able to get by either counting on a government or other pension,  by diminishing their expenses, by working longer than expected, etc. But how many people do you know who were able to reach financial independence and live off of their passive income (dividend and other) without touching their capital? Very few I would guess.

Iron Man is a competition that includes a marathon, the equivalent of a marathon swimming and also on a bike. It’s something that is often done in 12 hours and sometimes a few more hours…. it’s not easy at all, but the participants usually are all capable of making it through.

It’s not because they can’t do it

Every Iron Man competitor generally has the skills and body to finish the race. The same could be said about financial independence. I strongly believe that in 90% of cases, that goal is not only reachable but also very reasonable to expect. It’s not about how much you are paid per hour, what school you went to or even the skills that you have. I truly believe that is goal is possible for almost every individual.

Possible? Absolutely. Easy? Not even close

While Iron Man participants are able to finish the race, they usually will feel negative about the outcome for a good portion of the race. I can guarantee that no matter how good your plan is, you will often feel discouraged and disappointed by the performance and improvement of your portfolio.

It’s not about taking shortcuts

Iron Man is a competition that values endurance and consistence, I think the same is true for building a solid passive income portfolio. It will always be tempting to take shortcuts to improve the size and the speed of your accumulation. But as I wrote last week, I think the key to growing your portfolio has very little to do with being aggressive/taking shortcuts. It’s about being consistent with your investments, your contributions and everything else over long periods of time.

You will have setbacks

In Iron Man as in many other sports, athletes encounter setbacks such as injuries that can severely challenge their will, their determination, etc. I think it’s important to understand that setbacks will also happen when you are investing. Over a couple of decades of investing, you will experience market crashes, changes in the markets, changes in your personal circumstances, etc. All of these will be tests to see if you can keep your focus and stay on task.

In the end, success depends on you

It’s easy to blame family, friends and work for lacking time to train, injuries, and other factors that might have slowed down Iron Man athletes. But in training as in everything else, the major factor is not others, events or circumstances. It’s all about you. Are you dedicated enough to invest in a smart, dedicated and consistent manner and keep it up for 20 years?

It seems like a never ending road

It’s easy to put off a run, a swim, a good night of sleep or a good meal when the race is 8 months away isn’t it? I would argue that it’s also the case for investing. Why start investing when you are 40 years away from retirement? Why be focused on dividend stocks when you can try a few mining stocks and revert if it doesn’t work? Etc, etc. The truth is that you should start planning and executing your dividend portfolio right now. Not 10 years from now, not 10 months from now and not even 10 days from now. It’s just too easy to put it off a little bit longer….

You can do it

It seems like such a “cliche” but it’s true. Every one of us can get to the point where our passive income can account for all of our expenses. As I’ve said a few times in the past, I always set aside a specific amount invested in a steady and consistent portfolio and take a portion of what’s left to be more aggressive with my long & short tech stock picks. Are they paying off? You bet. Things are going great. But I am staying on course with the rest of my portfolio as I slowly head towards my finish line; financial independence.

I am confident that while most of you have never traded a pink sheet stock, you have heard of them, know a few of the companies and have stumbled upon a few of the symbols over time. I will be discussing one of these stocks tomorrow and expected to get a few questions regarding the pink sheet stocks so I took the liberty of answering some of them before you even ask. Hopefully it helps and I’ll be more than happy to give a shot at any unanswered ones.

What is a pink sheet stock?

In the US markets, there exist a few stock exchanges such as the New York Stock Exchange (NYSE) and the Nasdaq. Companies can become listed on these exchanges by doing a variety of things that include:

-Having a balance sheets and sales numbers that fit the exchanges requirements
-Paying annual fees to get listed
-Fulfilling a variety of listing requirements such as Sorbanes-Oxley

All of these require both time and resources and some companies choose to not be listed for a variety of reasons. Many choose to do so because the costs involved are too important to be worth it. But others simply choose not to or they get kicked off of the exchanges for different reasons that would include insufficient trading volume.

Are these pink sheet companies all tiny companies?

Not at all. To give one example, Nestle, the giant food company is not traded on US stock exchanges but it is traded in the pink sheet market.

Is there any volume or liquidity on these companies?

Like anything else, it really depends on each stock. For example, Nestle (NSRGY) often trades over 1 million shares per day giving shareholders all kinds of liquidity. So like everything else it depends on volume.

What are some concerns with trading pink sheet stocks?

I would say that a major one is that since accounting standards are not the same, you have to be careful about comparing numbers from these companies to other ones as standards could be significantly different. If the stock trades on other major markets it becomes less of a concern. Nestle for example is traded on Swiss markets.

Another concern is that many pink sheet stocks become unlisted because they are in financial trouble and are unable to satisfy the stock exchanges requirements. These stocks must then move to pink sheet markets.

Who regulates this market?

Because Pink Sheets stocks are considered to be over the counter (OTC), there are very few rules and laws that apply to these stocks. Because of that, price manipulation is a bigger problem.